Fenech, G. v Sterling, R

[1985] FCA 460

Re: GEORGE FENECH and JULIAN FENECH
And: ROBERT STERLING
No. G344 of 1983
Federal Court Practice

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Beaumont J.

CATCHWORDS

Federal Court Practice - claim for damages under s.87(1A) and s.87(2) of Trade Practices Act, 1974 - claim for interest prior to enactment of s.51A of the Federal Court of Australia Act, 1976 - whether s.79 Judiciary Act, 1903 picks up s.94 Supreme Court Act, 1970 (NSW) - whether interest part of measure of compensation under s.87(2)(d) of Trade Practices Act.

Nella v. Kingia Pty. Ltd., unreported, Toohey, J., 6 August 1985 - con.

Sanford Pty. Ltd. v. Dainford Ltd. (1984) 54 ALR 179 - con.

HEARING

SYDNEY
#DATE 12:9:1985

ORDER

The respondent pay to the applicants the sum of $3,975.93. Reserve liberty to the applicants to apply for further relief on such notice as a Judge shall allow.

That the respondent pay to the applicants their costs of the proceedings other than costs already reserved by Davies, J.

Direct that the applicants serve upon the respondent personally a sealed copy of these orders and Reasons for Judgment.

Reserve liberty to the respondent to apply within 14 days of service upon him of the documents mentioned in order 3 to set aside orders 1 and 2.

JUDGE1

The facts of this case which are relevant for present purposes were summarised as follows in the Reasons for Judgment of the Full Court (Woodward, St.John and Spender, JJ.) handed down on 29 October 1984 (reported in (1984) 57 A.L.R. 98 at pp.99-100): The applicants, along with a number of other people, were induced by a series of false representations to invest in a large land development project near Ballarat in Victoria. This occurred in 1975. The investors believed they were getting a half-acre piece of land for themselves, on which one or two houses could be erected, and which would appreciate rapidly in value as the project developed. Pursuant to the contract which the applicants signed on 12 November 1975, they paid a deposit of $650 on the same day and the balance of purchase money, namely $30OO, on 21 November 1975. In fact the scheme was little better than a sham, because the company purporting to sell that land, Robert Sterling Pty. Ltd., did not own it, there was no planning permission to use it for residential purposes, no sub-division had been approved, and all the applicants received for their money was a document headed "Memorandum of Title" which proclaimed that they owned "as tenants in common, 4/80ths in the whole of the land" which was then imprecisely described by reference to the Contract of Sale, which in turn spoke only of "20 acres or thereabouts being part of" the land contained in an identified certificate of title.

1. The representations complained of were made either in written advertisements or by a salesman employed by the selling company, which was a company of which the respondent was managing director and, apart from his wife, the sole shareholder. (The company is insolvent; on 28 July 1978 its winding up was ordered by the Supreme Court of New South Wales).

2. The applicants did not realise they had been tricked until they read a report in a newspaper, dated 6 September 1978, under the heading "200 LOSE $1.5m IN LAND RIP-OFF".

3. Proceedings were taken by the Trade Practices Commission against the respondent personally and, in a detailed reserved judgment delivered on 21 February 1980, Lockhart J. found that the selling company had engaged in misleading and deceptive conduct in contravention of s.52 of the Trade Practices Act, 1974 ("the Act") and the respondent had been knowingly concerned in and party to those contraventions.

4. The applicants then filed an application to the Court, on 31 October 1980, seeking orders pursuant to ss.82, 87(1A) and 87(2)(c) and (d) of the Act. This application was later amended to make clear that, in addition to relying on the comnbined effect of the named provisions, the applicants claimed alternatively under s.82, ss.87(1A) and 87(2)(c), and ss.87(1A) and 87(2)(d).

5. The matter came on for hearing before Davies J. who, on 24 June 1982, determined a number of preliminary points of law. Among the questions which his Honour then answered were several relating to the central question in the appeal to the Full Court. His Honour held that, at the time the events in this case occurred, no action under s.82 of the Act lay against a person in the respondent's position, and the later amendment to that section in 1977 did not create a retrospective right of action; that s.87(1A) did provide a right of action because it was expressed to have retrospective operation; however, insofar as the applicants sought remedies under it that were to the same effect as a claim under s.82, the three-year period of limitation in s.82(2) of the Act would apply.

6. Then, on 13 October 1983, Davies J. proceeded to give judgment in the application, relying upon the findings of Lockhart J. and an agreed statement of facts. He found that the applicants' cause of action accrued not later than the date when they paid the balance of their purchase price, on 21 November 1975. Since the application was not filed until almost five years later, his Honour applied the view expressed in his preliminary rulings on points of law and dismissed the application under s.87(1A) as statute-barred.

7. The appeal raised no question about the time at which the cause of action under s.87(1A) accrued. It was confined to the question whether the three-year limitation period prescribed by s.82(2) applied directly or at all to the application under s.87(1A). The Full Court held that it did not, acknowledging that nonetheless, delay in the institution of proceedings may constitute a discretionary defence to the grant of relief under s.87(1A).

8. The appeal was allowed, the relevant orders made by Davies J. were set aside and the matter was remitted to his Honour to be dealt with in accordance with the reasons of the Full Court. Subsequently, Davies, J. disqualified himself from further hearing the matter.

9. The respondent did not appear at the hearing before me. His former solicitors have filed a notice of their ceasing to act and the evidence of the respondent's having been notified of the hearing date is not entirely satisfactory. Since I propose to make orders in favour of the applicants, I propose to direct personal service upon the respondent of these Reasons and the orders to be made, reserving liberty to the respondent to apply within 14 days of service to set aside the orders.

10. It is clear from the reasoning of Lockhart, J. (affirmed on appeal - see Sterling v. Trade Practices Commission (1981) 35 ALR 59 at pp 67,70) and of the Full Court in the appeal from the decision of Davies, J. that the respondent has engaged in misleading and deceptive conduct in contravention of s.52 of the Act. Two questions remain for determination. Having regard to the time which elapsed between the conduct constituting the contraventions (November 1975) and the institution of these proceedings (October 1980), should relief be refused on discretionary grounds? Secondly, assuming that relief is to be granted, what is an appropriate measure of compensation and, in particular, should interest be awarded on the amounts paid by the applicants to the respondent's company and to the applicants' bank in respect of monies borrowed for this purpose?

11. In my opinion, the circumstances of the case do not call for the refusal of relief on discretionary grounds. The applicants did not appreciate that they had been tricked until 6 September 1978. On that day, the first applicant sought legal advice and discussed the matter with officers of the Trade Practices Commission. He was informed that the Commission proposed to institute proceedings against the respondent. He believed that his own claim against the respondent had to await the outcome of the Commission's proceedings. Lockhart, J. delivered his decision in February 1980 and the present proceedings were commenced eight months later. In my view, the delay in bringing this action has been satisfactorily explained.

12. In any event, there can be no suggestion that the respondent was in any sense prejudiced by the lapse of time which occurred. In particular, it cannot be said that the respondent may have been disadvantaged through difficulty in now locating potential witnesses: at the hearing before Davies, J., the respondent, who was then represented, conceded the making of the representations now relied upon.

13. I turn next to the appropriate measure of compensation. By s.87(1A), so far as relevant, the Court may, on the application of a person who has suffered loss or damage by conduct of another person that was engaged in in contravention of a provision of Part V, make such orders as it thinks appropriate against the person engaged in the conduct or a person involved in the contravention (including all or any of the orders mentioned in sub-section (2)) if the Court considers that the orders will compensate the first-mentioned person in whole or in part for the loss or damage. By s.87(2), the orders referred to in s.87(1A) include:
    
    

"....

(c) An order directing the person who engaged in the conduct or a person involved in the contravention constituted by the conduct to refund money or return property to the person who suffered loss or damage;

(d) An order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to pay to the person who suffered the loss or damage the amount of the loss or damage;"

1. Three heads of damage were advanced. In the first place, the applicants seek compensation for the amounts paid by them under the Contract, totalling $3,650.00. In my opinion, the applicants should be compensated on this account pursuant to s.87(2)(d) and I propose so to order.

2. Next, mention is made, nominally at least, of a claim for loss of profits on the transaction. But the applicants concede that the decision of the Full Court of this Court in Gates v. City Mutual Life Assurance Society Ltd. (1983) 68 FLR 101 forecloses the grant of such relief.

3. Finally, a claim is made for interest in respect of the sums of $650.00 and $3,000.00 paid by the applicants on 12 November 1975 and 21 November 1975 respectively, and for the sum of $325.92 paid to the applicants' bank by way of interest payable on the sum of $3,000 borrowed from the bank.

4. Although s.51A of the Federal Court of Australia Act, 1976 was not in force at the appropriate date, the applicants submit that the Court nonetheless has jurisdiction to award them interest either by way of compensation for loss or damage suffered by them pursuant to s.87(2)(d) of the Act or alternatively by virtue of s.94 of the Supreme Court Act, 1970 (N.S.W.) as picked up by s.79 of the Judiciary Act, 1903.

5. The applicants borrowed the sum of $3,000.00 from their bank for the purpose of payment of the balance purchase price owing under the contract. Between December 1975 and June 1977, the applicants repaid that principal sum to the bank together with interest and other bank charges totalling $325.92. The applicants offer no further specific evidence in respect of their claim for interest or for compensation on that account except expert evidence as to bank interest rates between June 1977 and September 1985.

6. I turn first to the claim made for interest by the application of s.94 of the Supreme Court Act. The authorities in this area were examined exhaustively by Toohey, J. in Nella v. Kingia Pty. Ltd., (unreported, 6 August 1985) and I respectfully adopt that analysis, in particular his Honour's view of the ratio decidendi of the majority (Sweeney and Woodward JJ.) in Centrepoint Freeholds Pty. Ltd. v. T.N. Lucas Pty. Ltd. (1985) ATPR 40-564. The present claim is founded exclusively upon the provisions of s.52 of the Act, that is to say, there is no claim made under the general law in the exercise of the Court's accrued jurisdiction. That being so, I think that, despite the passing observations made by Gibbs, C.J. in State Bank of New South Wales v. Commonwealth Savings Bank of Australia (1984) 58 ALJR 394 at p 397, I should follow the decision of Mason, J. in Australian National Airlines Commission v. The Commonwealth (1975) 6 ALR 433 at pp 435-6. His Honour's reasoning in the ANA case is squarely in point for present purposes and was adopted by Lockhart, J. in Hubbards Pty. Ltd. v. Simpson Ltd. (1982) 41 ALR 509 at pp 525-6, a case where, as here, the claim for substantive relief was confined to damages sought under a statutory cause of action conferred by the Act. I therefore reject the claim for interest made on this branch of the argument.

7. The alternative claim, based on the terms of s.87(1A) and s.87(2)(d), raises different considerations. The general position for present purposes was described by Fitzgerald, J. in Sanrod Pty. Ltd. v. Dainford Ltd. (1984) 54 ALR 179 at p 191 -
   
   

"However, whatever may be the position otherwise in respect of damages under the Act, I can myself perceive no difficulty in accepting that, when money is paid in consequence of misleading conduct, the loss suffered by that conduct includes not only the money paid but also the cost of borrowing that money or the loss from its investment, as the case may be: cf Frith v. Gold Coast Mineral Springs Pty. Ltd.

(1983) ATPR 40-339; affirmed (1983) ATPR 40-394; 47 ALR 547. Interest awarded as a component of damages in such circumstances is not for loss of the use of the money awarded as damages, but for loss of the use of the money paid over in consequence of the misleading conduct and is directly related to the misleading conduct." (emphasis added)

This reasoning was followed and applied by Burchett, J. in Geale v. Glenhoun Holdings Pty. Limited (In Liquidation) (unreported, 23 August 1985).

1. I respectfully adopt the approach taken by Fitzgerald, J. So far as it suggests that special rather than general damages by way of interest may be recovered at common law (as well as in equity (see Marine Board of Launceston v. Minister of State for the Navy (1945) 70 CLR 518 per Dixon, J. at pp 531-3)), the recent decision of the House of Lords in President of India v. La Pintada Compania Navigacion S.A (1985) AC 104 at p 127 supports this approach (and see Mann, On Interest, Compound Interest and Damages (1985) 101 L.Q.R. 30 at pp.38-9).

2. However, apart from the claim for $325.92 paid to the bank, there is no specific evidence of the kind contemplated by Fitzgerald, J. as necessary in order to sustain a claim for special damages. There is presently no evidence of the general financial position of the applicants at the time and no material from which any inference could be drawn as to how they would have invested the sum of $3,650.00 if they had not been induced by the respondent to part with it. In short, no evidence has yet been given with a view to establishing a specific loss of the kind mentioned by Fitzgerald, J. (see Jelin Pty. Ltd. v. Murdoch Pty. Ltd. (1985) ATPR 40-562 per Neaves, J. at p 46,451).

3. Since this aspect of the case was not fully argued at the hearing, I propose to reserve liberty to the applicants to apply for further relief in this connection if they are so advised. For the moment, I propose to award damages in the sum of $3,975.92, being the sum of $3,650.00 together with the sum of $325.92.

4. I make the following orders:
   
   

1. Order that respondent pay to the applicants the sum of $3,975.92. Reserve liberty to the applicants to apply for further relief on such notice as a judge shall allow.

2. Order that the respondent pay to the applicants their costs of the proceedings other than costs already reserved by Davies, J.

3. Direct that the applicants serve upon the respondent personally a sealed copy of these orders and the Reasons for Judgment.

4. Reserve liberty to the respondent to apply within 14 days of service upon him of the documents mentioned in order 3 to set aside orders 1 and 2.